Business Issues

Building A Better Business Model - Not Mouse Trap

PRODUCTIVITY IS
THE SUBJECT OF THE
CONVERSATION THAT ALL
IN BUSINESS NEEDS TO
HAVE.
FOR MANY, THE
ISSUE APPEARS TO BE
OVERLY-CHALLENGING
AND CONFRONTING.
HOPEFULLY, THE
ATTACHED ARTICLE TEXT
WILL BE THE CATALYST
THAT WILL STIMULATE
BOTH THOUGHT AND
ACTION.

By Barry Urquhart

OH MY, how things have changed,
and continue to change!
Since August 1962, when J.C.R.
Licklider of MIT, (the Massachustus
Institute of Technology) first wrote a series of
memos about his “Galactic Network” (which
would evolve in the internet), the rate of change
in technology, communications and business has
accelerated.
The correspondence and date-line have proven to
be significant benchmarks. Changes have been
effected in all manner of ways in which we live,
interact and do business.

OUT-DATED BUSINESS MODELS
Sadly, many business leaders have not updated
and made relevant the business models of their
operations. The consequences are palpable.
Bankruptcies and failures are increasing in
volume and value across a broad cross–section
of sectors, professions and regions. Look no
further than retail pharmacies, newsagencies,
fashion wholesalers and outlets, mining industry
contractors, business consultancies and coaches
and the taxi industry. Mining companies have not
been immune to the trend.
Being out-of-step and out-of-date are the initial
steps of being out-of-business.

THE EVOLUTION OF RECENT CHANGE
The August, 2008 onset of the Global Financial
Crisis (GFC) heralded the start of an intriguing
3-phase global change-process for commerce
and government. Embarrassingly, the then Australian Labor Federal
Government, and its arguably first-ever financially
illiterate Federal Treasurer, declared that the
nation had avoided the fallout of the crisis.
They were clearly wrong. The “cash-splash”
handouts from the Treasury simply delayed the
inevitable.
The journey has been interesting. The lessons
learnt invaluable. The steps have been
progressive ... as detailed below:

PHASE 1 – EFFICIENCY
Cash-flows and confidence throughout the world
were quickly impacted upon with the collapse
of Lehmann Brothers, in the United States of
America.
Profit margins were soon under pressure. Cost
ratios increased as a percentage of turnover.
Focus was promptly given to the call for “cost
cutting”. Staff numbers were reduced. So too
were inventories.
The consequences quickly registered along the
extended supply- chains.
Within entities the ranks and tiers of management
were aggressively thinned.
“Lean and mean” became another common
catch-call and in some instances a badge of
honour.
The measures of appropriate cost-containment
were subjective, and often difficult to quantify.
In many instances the “knives and axes” were
applied too “liberally”. Cases of corporateanorexia
became conspicuous. In essence, the
corporate body was feeding on itself and was
deteriorating, often with terminal consequences.
An example: Only now are some business owners
and managers negotiating new and lower rental
structures for retail, wholesale and manufacturing
premises.

KEY LESSON:
One should be in business to make money, not
to save money! Stay focused on the appropriate,
positive and longer-term outcomes.

PHASE 2 – EFFECTIVENESS
Following countless rounds of cost-cutting and
crisis meetings for team members, emphasis was
then given to improving effectiveness.
Many business leaders were sufficiently
discerning to identify that their businesses had
aged, become calcified and were inflexible.
Restructuring was suddenly in vogue. Silos were
dismantled. Organisation charts redesigned,
made flatter and more malleable. Departments
were relabelled to be “tribes”, “camps” and
“clusters”.
Any unsettling of internal confidence and stability
was countered with positive feedback of the new
approach from external suppliers, associates,
customers, clients and channels.
Previous hierarchical rigidity was broken down.
Authority and responsibility were delegated and
warmly embraced by team members who had
long desired the capacity to exercise control,
power and choice in how they did business.
In short, business was better for many, and not
solely measured by financial returns.
However, competitiveness, particularly on a
global measure, was still found wanting in a high
percentage of circumstances.

KEY LESSON:
There is always a better way. Find it.

PHASE 3 – PRODUCTIVITY
Once costs and structures had been reviewed,
refined and developed attention needed to be
redirected to productivity
Volume and velocity can be, and are, both
a cause and a consequence of competitive
advantage. Moreover, they are rewards that can
contribute to sustainable leadership, progress
and development.
Fixed costs (of doing business) are rapidly
reduced in relative (to turnover) terms. Variable
costs do truly evolve into being marginal costs.
Profit, margins and dividends escalate into being
attractive and rewarding.
Businesses that have progressed to this phase
are few. For some it seems to be a step-toofar.
The prospects and outcomes of increased
volumes and velocity are confronting, possibility
challenging.
Now is a good time to commence the journey.

KEY LESSON: Individually and collectively, simplifying
processes, structures, policies, attitudes and
work habits has a huge impact on personal, group
and entity productivity.

BARRY URQUHART
of Marketing Focus
is an international
recognised and
respected business
strategist, consumer
behaviour analyst and
conference keynote
speaker.

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